Momentum Stock: Par Pharmaceutical Companies (PRX)

Par Pharmaceutical Companies, Inc. (PRX) continues to pressure its multi-year high just above $29 on rising estimates and a compelling valuation. This Zacks #1 rank stock will take a four-quarter, average-earnings surprise of 27% into its early, August Q2 results.

Company Description

Par Pharmaceutical Companies, Inc, through its subsidiaries, develops and manufactures generic and branded drugs in the United States. The company was founded in 1978 and has a market cap of $987 million.

The last update we got on PRX came in early May when the company released better than expected Q1 results, with its largest revenue producer showing solid gains from last year.

First-Quarter Results

Revenue for the period was up 44% from last year to $288 million. Earnings came in at 67 cents, one penny ahead of the Zacks Consensus Estimate. The company’s average earnings surprise over the last four quarters now stands at 27%.

The primary revenue driver for the quarter Metoprolol, up 12% from last year to $183 million, where Par is the authorized generic for all strength of AstraZeneca;s Toprol XL.

Sales of Par’s Clondine, a hyper-tension drug that continues to find new applications, were also strong, increasing 37% from last year to $18.5 million.

Moving forward, Par is at risk of having a highly concentrated revenue stream, where 85% of its sales come from 3 products.

Balance Sheet

The company was able to parlay its strong performance into strengthening its balance sheet, with cash and equivalents up $14 million from last year to $148 million. Par’s total debt is down $82 million from last year to $47 million.

Estimates Rising

The analysts have been encouraged by the results, pushing estimates higher. The current year is up 31 cents in the last 90 days to $2.32, while the next year is up 34 cents to $2.91, a bullish 26% growth projection.

Valuation

In spite of the recent gains, PRX still looks reasonably priced, trading with a forward P/E of 12X against the industry average of 14X.

2-Year Chart

PRX has been pressuring its multi-year high above $29 for the last few months in spite of the volatility we have seen in the overall market. The MACD below the chart is bullish, with the short-term moving average advancing ahead of its long-term counterpart. Look for support from the long-term trend line on any weakness, take a look below.